SO LONG, MR WEDDLE

weddle announced on Wednesday that the new advisory platform will be for the 2008 Summer Regionals. BAD NEW FOR US: it will only have "limited" ability to stray from model portfolios, and will include funds and "maybe some ETFs". So the idea of picking the best out of the whole fund/ETF universe is gone. I am gone. 'Bye Jim!

newnew - so you have the time and the knowledge to pick the funds that will work in the future! You also have the time and the knowledge to maintain the allocation, know when to move funds to take advantage of sector rotations. You also have your CFA or at minimum your CIMA. I'm impressed that you're that good & that educated.

The purpose of managed money is to take us out of the investment equation & turn that over that job to CFA & CIMA's because they have more experience, knowledge & the time to do it right. This allows us to spend the time managing client's lives - you know, the thing they actually pay us for.

I agree with you, but I want more flexibility. I want to be able to do what i do now, which is to use model ports OR NOT depending on a particular case. What if I want to ACAT in an account, and the new client wants to stay in a wrap? It will have to be the ol' "liquidate and transfer" no matter what. Is that right, esp in a non-qualified account?
Lets face it- model ports allows Jones to make sure we all use the revenue sharing fund families.

newnew wrote: I agree with you, but I want more flexibility. I want to be able to do what i do now, which is to use model ports OR NOT depending on a particular case. What if I want to ACAT in an account, and the new client wants to stay in a wrap? It will have to be the ol' "liquidate and transfer" no matter what. Is that right, esp in a non-qualified account?
Lets face it- model ports allows Jones to make sure we all use the revenue sharing fund families.

Certainly flexibility is not Jones' strong suit. However, I'm approaching 50 acct's in wrap & I have only one acct that I've done that with, and I'm regretting it!

So I guess I was right...I said 2008 they would announce the fee based platforms. The FA would have no control over pricing. The FA would have no control over choices. The FA would be slave to the KoolAid. They will not allow you to take any of the money you have in funds currently and move them into the new program. it has to be all new money. And lastly, Jones' fee based platform will be holier than thou better than everyone elses.

What are you boys at Jones going to argue about now...That the wrap program at our firm is better than the wrap program at your firm. You guys are the best salespeople in the world.

good comments, except the "jones sucks" is not exactly the kind of comment that keeps a good conversation flowing.

I am looking at options. Have an indy RIA friend who wants me to join him in some way. Perhaps share expenses, but have two indy books. Gotta admit his points on "no commission/no FINRA" are intriguing. No hurry though. Gotta make a good decision-- wirehouse also interested in me.

The only thing about the RIA route that gives me pause, is what do you do with the clients who are absolutely against fee-based arrangements? My #2 & #3 clients are commission-based and no way would I want to give them up. I guess there's nothing to prevent you from using a different platform and still sharing expenses. In fact someone suggested in the recent past that you can run both an RIA platform (outside of a B/D) while running a commission-based platform under a B/D.

The biggest concern I would have with going to a wirehouse is what happens when you decide that you don't like working for them any better than you liked working for Jones? That may not happen, but you can be more certain that you'll get along with the boss if the boss is you.

You're wise to take your time and plan your departure carefully. Whatever you decide, good luck and keep us posted...

spikedkoolaid wrote: So I guess I was right...I said 2008 they would announce the fee based platforms. The FA would have no control over pricing. The FA would have no control over choices. The FA would be slave to the KoolAid. They will not allow you to take any of the money you have in funds currently and move them into the new program. it has to be all new money. And lastly, Jones' fee based platform will be holier than thou better than everyone elses.

What are you boys at Jones going to argue about now...That the wrap program at our firm is better than the wrap program at your firm. You guys are the best salespeople in the world.

At a meeting about a month ago a GP told us that the fee based platform will be:Offered mid-2008Will have home office portfolios as well as FA flexibilityWill offer Preferred funds, no-load funds and other load funds besides the preferred.ETFs and stocks MAY be introduced later.Auto Rebalancing"Mature" A share accounts will have procedures to move to fee based, newer A shares will not.$100,000 minimumPricing not yet releasedThat is all I remember but I feel like a missed something

so at least initially, all clients in the program are stuck with the tax inefficiency of mutual funds. although it sounds like passive no-loads may be included for that, which is good.

Weddles verbal commenta did not seem to indicate much "A flexibility".

Indyone: my RIA friend also has a B/D for no load annuities, he said, since I do some insurance too. Not sure how it would come together, but I am very concerned that if I go wirehouse I'll end up indy eventually anyway--so why bother? I'm not that "corporate".

Maxstud wrote:At a meeting about a month ago a GP told us that the fee based platform will be:Offered mid-2008Will have home office portfolios as well as FA flexibilityWill offer Preferred funds, no-load funds and other load funds besides the preferred.ETFs and stocks MAY be introduced later.Auto Rebalancing"Mature" A share accounts will have procedures to move to fee based, newer A shares will not.$100,000 minimumPricing not yet releasedThat is all I remember but I feel like a missed something

Since I am not familiar with exactly how other firm's advisory accounts or wrap accounts work, could someone compare/contrast what is listed above? To me it does not sound too bad, other than the fact that I would like to have stocks and individ bonds included. I am not concerned about the account minimum - I can't imagine putting something smaller than that in a fee account. C shares get the job done for that. Although it would be nice to move A-share accounts in there, it wouldn't seem fair to the client if they recently paid a load. I am guessing its 75 bipswith a 40% payout (it better not be reduced ).
My number 1 concern is that I be able to use certain fund families that are hard to incorporate right now due to breakpoints (i.e. Loomis Sayles Strat Income). I sometimes will do a-shares for the core plus a c-share for the random fund, but it's sometimes too difficult to explain to client, therefore not worth the aggrevation.

I just reviewed a proposal from Morgan Keegan for some prospects. It sounds identical to what Jones is proposing. They called it the "Preferred Funds Non-Discretionary Program". I had to wonder if they got in trouble for revenue sharing too.

I've got another prospect that works with the Mutual Fund Store. Same setup.

Buddy that works at BAC. Their wrap acct is also the same.

I've seen many other programs that look a lot like what Jones is going to send us. I'd like the ability to do stocks and bonds too, but not enough to get upset about at this point. Let's see if they can run it properly first. Then they can add the bells and whistles. I don't ever see Jones giving us full discretionary trading accounts like you see at the big wires. Too much compliance and too much litigation risk.

That newnew has decided to leave based on this speculation is funny. Tells me there are other problems/issues and this one is just a trigger.

- What really is the total universe of funds to pick from?
- Who's behind the portfolios? Personally I'd be concerned if Jones was handling the allocations, but you may not be. The reason I'd be concerned is that you don't have deniability. "Let's fire Edward Jones here. They are significantly underperforming..." Where do you go from there? Also, if it's Jones managing the portfolios then Jones has to do the due diligence on each fund in the universe. This means there will be a much higher weighting in the preferred funds, and likely a smaller universe.
- Will it be custodied at Jones & therefore be able to use institutional shares or at Fidelity or elsewhere & then have to use shares w/ 12b-1's(custodians are often compensated by the 12b'1's). I doubt this will be a problem.
- The account minimum is about right. I have only 2 acct's that are under $100K & I'm kicking myself for both of them.
- The industry pays a premium payout for wrap acct's - usually 5% greater than the grid. Firms are looking for a more sustainable business model than burning out their best commission-driven reps also & they want the recurring & somewhat stable revenue stream.
- 75 bps is too small to do these types of acct's in my mind because there's a much higher level of liability to these acct's. Putting on my principal's hat - determining suitability is required at the time of the sale of a mutual fund. In a wrap account because the disclosed fee is for advice, determining the suitability of the investment is required on an ongoing basis. Essentially, you can't walk away from these accounts. I require at least 100 bps - 120 bps depending on the type of services I am offering to clients.
- Client costs are competitive if the cost to the client is between 1.3% - 1.5% for the mutual fund wrap program + portfolio management fees.
- Firms often have portfolios for people who are accumulating & different portfolios for those in the distribution phase. Tax efficient portfolios are available within each allocation. Also, many firms are going to Index Plus portfolios where they buy ETF's for asset classes they don't believe they can outperform with a mutual fund. This dramatically lowers fees & allows the Bogleheads to have their day. Finally, unified managed acccounts(separately managed accts, ETF's & funds) and SMA programs are often available for high net worth individuals. I'm sure that Jones will eventually have something to fill each box.

No Control of Pricing
No Control of Funds
No Control of Fixed Income: I can see it already: "Mr. Customer let's liquidate and transfer that money from XYZ Brokerage firm and move it into our fee-based platform charging .75. It will save you XXX dollars. And then we are going to buy 3 of these individual 30 year bonds out of our inventory paying me 2.5 Net and since you don't need the interest we will dollar cost average the interest payments into this great 5-Pack of Stocks.
They will call it diversification.
Until Jones sees the loop holes in the pricing models they will continue to promote advisors liquidate and transfer their accounts to Jones. The law of unintended consequences.

I can't imagine the struggling Segment 2 Broker getting a $250k rollover and getting paid 40% on .75. They will figure out the math very quickly. $875 on a yearly basis. I just can't see it.

Spin it how you want...The true advisory business is taking the clients needs and assessing their goals and then allocating the portfolio accordingly. Not just Liquidate and Transfer!

I've got one fundamental question about implementing a fee-based program at Jones and it's frankly the reason I never expected to see such a program at Jones. How do you run a fee-based program, which encourages activity to justify the fee, in a firm who's mantra is buy and hold?

I hear you, but is here is what is being said: the client will sign a form stating exactly what activities to expect. This will be annual reviews, quarterly rebalancing, and things related to planning tools like personal financial statements and specific goals, etc.
the math of it means it will not be used by newbies. but the guy with a large book can triple his trails from 25 to 75 bps gross. (30M AUM in fees= 2 trips per year all over the world).

spikedlookaid is right about the continued over-use of liquidate/transfer.

newnew wrote:yeah, just a trigger. might've stayed had this happened already, but I agree they will underprice it--that is what I have heard (75 bps or so gross). Maxstud got the scoop?No, I told you everything I have heard.

I'm all for a fee based option but is funny that you hear people say fee based is better for the client because now the advisor is on the same side of the table as the client. Then you hear Indyone wrote:How do you run a fee-based program, which encourages
activity to justify the fee, in a firm who's mantra is buy and
hold?.I think it boils down to the fact that most people are told that a fee based advisor is in their best interest, most news articles I read encourage that idea. I believe the way to survive in the early years is a combination of fee based and commission based. If you have a 401(k) rollover you could offer a commissioned based account, if you have someone who owns some mutual funds that they would like to keep then offer fee based. Isn't that what is in the best interest of the client, or am I naive?I have always been a buy and hold investor, even before I was in this business, I also have always rebalanced on a yearly basis. Just because I don't believe I can time the market doesn't mean that a different investment might come along every once in while that I would want to add to a portfolio or an investment that I have held for a while doesn't match what I am doing currently. I think fee based accounts will allow me to make these decisions for my clients with out worrying about the commission they would have to pay.

You get the opportunity to transfer an account that has some mutual funds in it like T Rowe Price, High Mark Large Cap Value, Julius Baer International, Metropolitan West Bond, etc.

You tell the client, "Yeah, let's liquidate those funds and bring them over here and put them in our American Funds (65% Net Revenue) and sprinkle in some VanKampen. We'll get rid of that bond fund because Bond Funds are bad, you really want 3- 30 year individual bonds that pay a fixed amount of interest and pay me 2.5 Net."

What I'm trying to say is when EDJ limits the amount of funds in the program and limits the pricing and limits the flexibilty it really ties your hands to liquidate and transfer good funds and put them in yours.

An example I give you is last month, I transferred a Schwab fee based account. I did an analysis of the portfolio and the mutual funds that were used. It was a great portfolio. I didn't sell a thing. I even kept the fee the same as what was at Schwab. The client was happy, I did what was right, and no tax consequences.
By the way, all of the cost basis transferred as well. Unlike when I used to work at Jones and tell people, you need to go ask your former broker for cost basis.

No he said he didn't change anything. They're just going to pay the fee to him now, not Schwab.

I don't think Jones will ever make a blanket statement that says fee based is better or commission is better. I think they will encourage us to offer both platforms to clients and let them choose which is better.

The problem I have with most wrap accounts is that you pay the fee simply for the ability to buy any kind of fund from any family. Rarely do prospects tell me they have review requirements like I believe Jones will implement.

I have clients who just want me to roll over their 401k or make better investments for them one time. They don't want to hassle with the planning side of my biz. Those are perfect for commission based accounts. The ones that want to work through the planning process and want the extra attention (and subsequent changes in the account) will be offered the fee based account. It will be an interesting transition, but I think it will definitely be worth it in the long run.

I wouldn't be suprised if the fee comes out to be north of 1%. Our MAP account is over 2% @ $500K. I can also see a tiered approach. Something like 1.5% for the first $250K, 1% next $250K, .75% everything else. That's the way the MAP is priced. Maybe they'll adopt something like that. Who knows. It's too soon to make any serious guesses.

Spaceman Spiff wrote: No he said he didn't change anything. They're just going to pay the fee to him now, not Schwab.

Spiff - yeah - I said advice didn't cost anything MORE! He wasn't getting advice from Schwab. Now, he's getting advice and he's paying the same fee. The only reason it ticks me off is that Spiked is probably a really conscientious rep who will give good service, but has devalued himself and others in the industry by telling the client that advice is cheap.

If all you're paying for is the labor & materials for your house, why would you ever pay an architect? Could it be because they're required to have those darn drawings - and if you make a material change to the plan for the house you have to go back and get the architect to sign off on the change.

I don't think Jones will ever make a blanket statement that says fee based is better or commission is better. I think they will encourage us to offer both platforms to clients and let them choose which is better.

First of all Spiff, Jones already has made the statement that commission is better for everyone...they've been saying it for years.

The problem I have with most wrap accounts is that you pay the fee simply for the ability to buy any kind of fund from any family. Rarely do prospects tell me they have review requirements like I believe Jones will implement.

I have clients who just want me to roll over their 401k or make better investments for them one time. They don't want to hassle with the planning side of my biz. Those are perfect for commission based accounts. The ones that want to work through the planning process and want the extra attention (and subsequent changes in the account) will be offered the fee based account. It will be an interesting transition, but I think it will definitely be worth it in the long run.

They don't want to hassle with the planning side of your business? I hate to point out the obvious to you, but you don't have a planning side to your business.

I wouldn't be suprised if the fee comes out to be north of 1%. Our MAP account is over 2% @ $500K. I can also see a tiered approach. Something like 1.5% for the first $250K, 1% next $250K, .75% everything else. That's the way the MAP is priced. Maybe they'll adopt something like that. Who knows. It's too soon to make any serious guesses.

I don't think Jones will ever make a blanket statement that says fee based is better or commission is better. I think they will encourage us to offer both platforms to clients and let them choose which is better.

First of all Spiff, Jones already has made the statement that commission is better for everyone...they've been saying it for years. - And for years the demographic was the same. Now, with the millions of baby boomer hitting retirement age, the rules are changing. Weddle himself told our region a couple meeting ago that he believed that commission based was best while accumulating assets and fee based was best when spending your assets.

The problem I have with most wrap accounts is that you pay the fee simply for the ability to buy any kind of fund from any family. Rarely do prospects tell me they have review requirements like I believe Jones will implement.

I have clients who just want me to roll over their 401k or make better investments for them one time. They don't want to hassle with the planning side of my biz. Those are perfect for commission based accounts. The ones that want to work through the planning process and want the extra attention (and subsequent changes in the account) will be offered the fee based account. It will be an interesting transition, but I think it will definitely be worth it in the long run.

They don't want to hassle with the planning side of your business? I hate to point out the obvious to you, but you don't have a planning side to your business. - Yes, I do. We didn't used to, but we do now. It's every bit as solid as everyone else. Especially for the people who have embraced it.

I wouldn't be suprised if the fee comes out to be north of 1%. Our MAP account is over 2% @ $500K. I can also see a tiered approach. Something like 1.5% for the first $250K, 1% next $250K, .75% everything else. That's the way the MAP is priced. Maybe they'll adopt something like that. Who knows. It's too soon to make any serious guesses.

LOL, wow right in a row the usual suspects with nothing new to say, Philo, bspears, foot and jerk. Maybe I should have waiting for CIB revenue sharing post before I posted so it would have been the 5 of you.Maybe you guys should set up a conference call, all crack open a beer and share your EDJ horror story, sounds like good times to me!

Maxstud wrote:LOL, wow right in a row the usual suspects with nothing new to say, Philo, bspears, foot and jerk. Maybe I should have waiting for CIB revenue sharing post before I posted so it would have been the 5 of you.Maybe you guys should set up a conference call, all crack open a beer and share your EDJ horror story, sounds like good times to me!

Max, I don't have any connection with Jones other than being a curious bystander. That said, why the hostility and ad hominem attacks? Do you have issues with people telling their opinions? Or is your problem that these folks with "Edward Jones horror stories", as you so quaintly put it, are hitting a little too close to home? In any event, I haven't seen anything by you that shows any of the points made by any of "the 5" to be untrue.

Redundant, redundant, and redundant. No new information. Same drone, kool aid, you dont know what you dont no come backs, GP's this GP's that. It's all been said before. No they're not hitting to close to home, they have been saying it for 2 years now if it was going to hit home it would have already."In any event, I haven't seen anything by you that shows any of the points made by any of "the 5" to be untrue."I have no reason to discuss these points with these guys, it's like going to the Democratic convention to discuss how great a job G.W. Bush is doing."Spiff, with all due respect, until you're able to look at Jones as
others see it you never will be able to understand how wrong you really
are."The only people that matter is the clients that work with Jones, I sure don't care what some indy guy or Merrill guy thinks about how we run our business. Laugh and joke all you want, I'm not in the biz to impress people who will never do business with me.

Maxstud wrote:Redundant, redundant, and redundant. No new information. Same drone, kool aid, you dont know what you dont no come backs, GP's this GP's that. It's all been said before. No they're not hitting to close to home, they have been saying it for 2 years now if it was going to hit home it would have already."In any event, I haven't seen anything by you that shows any of the points made by any of "the 5" to be untrue."I have no reason to discuss these points with these guys, it's like going to the Democratic convention to discuss how great a job G.W. Bush is doing."Spiff, with all due respect, until you're able to look at Jones as others see it you never will be able to understand how wrong you really are."The only people that matter is the clients that work with Jones, I sure don't care what some indy guy or Merrill guy thinks about how we run our business. Laugh and joke all you want, I'm not in the biz to impress people who will never do business with me.

I'm not laughing or joking. As I've posted before, if you guys are happy with it, I'm happy for you, but your lip service changes nothing. I suppose that's as good as you can do Max, given what you have to work with.

Get to work Spiffy. You can't make any money on here...oops...unless you can dial and type. My bad....WHat are you calling on today Spiff. CIT bonds, GMAC's, Household Bonds, anyother mortgage bonds you pushin to the retirees...

Philo - I'm serious. You guys are quick to tell us how much Jones sucks. You tell me I don't have a financial planning part to my business. I'm wondering what the heck all these reports I keep printing are for then. What about all those meetings I've had with clients to discuss their plans and goals? I guess I should be thanking you. Evidenlty I don't have the ability to do any financial planning, so I should stop wasting my precious time on it. That gives more that many more hours each day to call people on the new 4.5% AAA 30 year muni @ 3 points.

C'mon. Prove to me that I'm wrong. That whereever you are is soooo much better than EDJ.

Where did I say Jones sucks? Where did I say anything about revenue sharing and GPs?

What I did say is that if you're happy at Jones, then I'm happy for you. You, on the other hand, have jumped to defense and claimed you had everything as good as anyone else. All I did was agree with you.

Look, I don't have a dog in this fight. I asked some questions about the Jones business model and all I get is grief and insults from you creeps. Get a grip, will you?

Would this be a good time for me to make the usual crack about the Jones office in the strip mall wedged between the dry cleaners and the Subway? How about one making fun of cold walking and how it debases the entire industry (and that's no small feat)?

I'm sorry, that's cheap and I just can't help myself. I'm sure there are some great people laboring at Jones, and it really does make me more than a little sad to see the blur of FA rotations through some of the strip mall locations.

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